Faced with the biggest economic crisis since World War II, the EU itself has decided to borrow to help its member states.

▲ Commission President Von der Layen and European committee President Charles Michel after announcing the agreement in Julycommittee Europeancommittee ].

ANALYSIS / Pablo Gurbindo Palomo

"Deal!With this "tweet" at 5:30 in the morning of July 21, the president of the European committee , Charles Michel, announced the achievement of an agreement after the longest meeting in its history (more than 90 hours of negotiations). 

After the failed summit in February, the European countries were aware of the importance of reaching an agreement, but certain countries saw it as more urgent than others to finalize the Multiannual Financial framework (MFF) for the next seven years. But as with everything else, the Covid-19 pandemic has overturned this lack of urgency, and has even forced the Member States to negotiate, in addition to the budget, aid to alleviate the effects of the pandemic on the 27.

The agreement consists of an MFF of 1.074 trillion euros. A figure lower than that demanded in February by the so-called friends of cohesion (a conglomerate of countries from southern and eastern Europe) and the Commission itself, but also higher than the figure that the frugals (the Netherlands, Austria, Denmark and Sweden) were willing to accept. But it was not this figure that was the subject of the discussion, but how much and how the post-pandemic recovery fund was to be set up to help the countries most affected by the pandemic. The agreed Fund was 750 billion, divided into 390 billion to be given to the Member States in the form of grants, and the remaining 360 billion to be given in the form of a 70% loan to be disbursed between 2021 and 2022.

The figures are dizzying, and based on the February negotiations, where some of the members preferred something more austere, one might ask: How did we reach this agreement?

The Hamilton moment

With the arrival of Covid-19 in Europe and a considerable paralysis of all the world's economies, the European capitals quickly realized that the blow was going to be significant and that a strong response was going to be necessary to soften the blow. Proposals at the European level were not long in coming. For example, the European Parliament proposed a recovery package of 2 trillion euros on May 15, to be included in the MFF 2021-2027.

The most noteworthyproposal was presented on May 18 by French President Emmanuel Macron and German Chancellor Angela Merkel. And not only because it was driven by the two main economies of the Union, but also because of its historic content.

There has been talk of Hamilton momentin allusion to Alexander Hamilton, one of the founding fathers of the United States and the first Secretary of the Treasury of the newly founded republic. In 1790 the thirteen states that made up the young American nation were heavily indebted due to the war effort of the Revolutionary War, which had ended only seven years earlier. To solve this problem, Hamilton, Secretary of the Treasury, succeeded in convincing the federal government to assume the states' debt by "mutualizing" it. This event marked the strengthening of the American federal government and served to create the instructions of the U.S. national identity. 

It seems that with the Franco-German proposal , the Hamilton moment has arrived. The proposal is based on four pillars: 

1. European health strategy, which may include a joint reservation of medical equipment and supplies, coordination in the acquisition of vaccines and treatments. In turn, epidemic prevention plans shared among the 27 and common methods for registering the sick.

2. A boost to the modernization of European industry, supported by an acceleration of the ecological and digital transition.

3. Strengthening the European industrial sector, supporting production in the Old Continent and diversification of supply chains to reduce global dependence on European Economics .

4. 500 billion reconstruction fund for the regions most affected by the pandemic based on EU budgetary programs.

It is this fourth pillar which we can call "Hamiltonian" and which is historic as it would allow for the first time in history the EU itself to issue debt to finance this fund. This proposal has broken years of a German stance against any subject collective indebtedness. "We are experiencing the biggest crisis in our history... Due to the unusual nature of the crisis we are choosing unusual solutions," Merkel said in the joint video conference with Macron.  

According to this proposal , the funds would not be reimbursed directly by the countries but by the Community funds in the long term, either through its usual resources or through new sources of income. It should also be pointed out that the proposal referred to the submission of this fund in the form of subsidies, i.e., without any subject of interest for the recipient countries.

Among the reactions to this proposal were those of the frugal, who rejected that the funds should be provided in the form of subsidies. "We will continue to show solidarity and support for the countries most affected by the coronavirus crisis, but this should be in the form of loans and not subsidies," said Austrian Chancellor Sebastian Kurz. The frugal proposal is that financial aid raised on the debt markets should be submit to the states at low interest rates, i.e. as a loan, and conditional on a reform program.

On May 27, the Commission announced its proposalproposal, very similar to the Franco-German one, but extended. The proposal consists of a 1.1 trillion euro MFF and a 750 billion euro recovery plan called Next Generation EU. This recovery plan is based on three pillars financed with new instruments but within pre-existing headings:

The first pillar covers 80% of the recovery plan. It deals with support to Member States in their investments and reforms following the Commission's recommendations. For this purpose, the pillar has the following instruments:

• Recovery and Resilience Mechanism (the most important part of the proposal): financial support for investments and reforms of the States, especially those related to the ecological and digital transition and the resilience of national economies, linking them to EU priorities. This mechanism would be composed of 310 billion in grants and 250 billion in loans.

• React-EU Fund within the cohesion policy with 55 billion. 

• Increase in the Just Transition Fund: this fund is intended to support States in undertaking the energy and ecological transition, to move towards a policy of climate neutrality. It would be increased to 40 billion.

• Increase in the European Agricultural Fund for Rural development : to support rural areas to comply with the European Green agreement . It would be increased by 15 billion.

The second pillar covers 15% of the plan. It focuses on boosting private investment, and its funds would be managed by the European Investment Bank (EIB):

• 31 billion Solvency Support Facility

• EU-Invest program increased to $15.3 billion

• New Strategic Investment Fund to promote investment in European strategic sectors 

The third pillar comprises the remaining 5%. It includes investments in aspects that have result key to the coronavirus crisis:

• EU4Health program to strengthen health cooperation. With a budget of 9.4 billion.

• Strengthening of rescEU, the European Union's Civil Protection Mechanism, by 2 billion.

• Horizon Europe project for the promotion of research and innovation worth 94.4 billion.

• 16.5 billion in support for foreign humanitarian financial aid .

To obtain the financing, the Commission would issue its own debt on the market and introduce new taxes of its own, such as a border carbon tax, emission rights, a digital tax or a tax on large corporations.

It should also be noted that both access to MFF and Next Generation EU aid would be conditional on compliance with the rule of law. Something that did not please countries such as Hungary or Poland, which, among others, consider that it is not clear and that it is a form of interference by the EU in their internal affairs.

Negotiation at the European Summit

With this proposal on the table, the heads of state and government of the 27 met on July 17 in Brussels amid great uncertainty. They did not know how long the summit would last and were pessimistic that an agreement would be reached.

The hot points of the negotiation were mainly the amount and form of the Reconstruction Fund. Countries such as Spain, Italy and Portugal wanted the aid to come in the form of subsidies in full and without any subject . On the other hand, the frugal countries, led at the summit by Mark Rutte of the Netherlands, wanted the reconstruction fund to be reduced as much as possible, and in any case to be provided in the form of loans to be refund and as an "absolute precondition". "Any financial aid from the North means reforms in the South. There is no other option," said Rutte at a press conference in The Hague.

As in any negotiation, positions were loosening. It was already clear that neither of the two positions was going to remain unscathed and that a mixed solution with both subsidies and loans was going to be the solution. But in what percentage? And with reform conditionality?

For Spain, Italy and Portugal, the subsidies could not be less than 400 billion, which was already a concession of the 500 billion from which they had started. For the frugal, who were joined by Finland, this figure could not exceed 350 billion, which would reduce the total Fund to 700 billion. This was a major concession by the frugal members, who went from talking about zero subsidies to accepting them as 50% of the amount. Michel's final proposal was 390 billion in subsidies and 360 billion in loans to try to convince all parties.

The big stumbling block, apart from the percentage, was the conditionality of reforms for the submission aid defended by the frugal. The ghost of the Troika imposed after the 2008 crisis was beginning to appear, to the disgrace of countries such as Spain and Italy. Rutte demanded that the national plans that countries had to submit to the Commission in order to receive the Fund should also pass through the committee of the 27 and that unanimous approval was necessary. This formula basically allowed any country to veto the national plans. Germany, for its part, did not go as far as the required unanimity, but did ask for some control by the committee.

Rutte's stance angered many countries that saw the proposal as a way to force reforms that have nothing to do with economic recovery.

The president of the committee presented a proposal to bring the parties closer together: the "emergency brake". According to Michel's proposal , countries will have to submit their reform plan to the committee and it will have to be approved C qualified majority. After its approval, any country is allowed to submit to the committee its doubts about the fulfillment of the plans presented by a State; in this case, the committee would have a maximum period of three months to make a pronouncement. The country would not receive aid until a decision is received.

For those who may be surprised by the large concessions of the frugal, we must mention the figure of the "rebates" or compensatory checks. These are rebates on a country's contribution to the budget and were introduced in 1984 for the United Kingdom. The British were one of the main net contributors to the European budget , but they hardly benefited from its aid, 70% of which was earmarked for the Common Agricultural Policy (CAP) and the Cohesion Fund. It was therefore agreed that the British would have a permanent discount on their contribution. Since then, other net contributor countries have been receiving these checks. Although in these cases they had to be negotiated with each MFF and were partial on a specific area.

It is a very controversial figure for many countries, and an attempt was already made to remove it in 2005. But what is undeniable is that it is a great bargaining chip. The frugal countries have wanted to keep it from the beginning, and even strengthen it. And faced with the difficulties of negotiation, the rest of the Member States have seen that it is an "affordable" and not very elaborate way of convincing the "hawks of the north". After an initial stance, they ended up increasing it: Denmark will receive 377 million (considerably higher than the initial 222 million); Austria will double its initial amount to 565 million; Sweden will receive 1,069 million (higher than the initial 823 million); and the Netherlands will receive 1,575 million. Germany, as the largest net contributor, will receive 3.671 billion.

The last important negotiation point to be addressed is the conditionality of compliance with the rule of law in order to receive the various funds and aid. Hungary and Poland, for example, have an open transcript for possible violation of article 7 of the Treaty on European Union (TEU), which allows a Member State to be sanctioned for violating basic values of the Union such as respect for human rights or the rule of law. Many countries have pressed the issue, but given the difficulty in negotiations and a possible risk of vetoing the agreement depending on the vocabulary used by the Hungarian President Viktor Orban, this clause has come to nothing.

To recapitulate, and as stated at the beginning of the article, the agreement ended up with an MFF of 1.074 trillion euros; and a post-pandemic reconstruction fund, the Next Generation EU, of 750 billion, divided into 390 billion in the form of subsidies and 360 billion in the form of loans. To this must be added Michel's "emergency brake" for the submission aid and the significant sum of the "rebates".

The cutbacks

Yes, there have been. Apart from the already explained rule of law clause, there have been several cuts in several of the items proposed by the Commission. Firstly, a significant cut in the Just Transition Fund, which has been reduced from the initial proposal of 40 billion to 10 billion, to the anger of Poland in particular. Secondly, the rural development funds are reduced from 15 billion to 7 billion. Thirdly, the 16.5 billion fund to support external humanitarian financial aid , the 31 billion solvency support instrument ( proposal by the Commission) and the 9.4 billion EU4Health program have come to nothing. And finally, the Horizon Europe project would drop from the 94.4 billion proposed by the Commission to barely 5 billion.

Winners and losers?

It is difficult to speak of winners and losers in a negotiation where all parties have yielded a great deal in order to reach an agreement. Although it remains to be seen whether the positions of the countries were truly immovable from the beginning or whether they were simply used as an instrument of pressure in the negotiation.

The countries most affected by the pandemic, such as Italy and Spain, can be happy because they will receive a very large sum in the form of subsidies, as they wanted. But this conditionality that they were not going to accept in any way, in a way, is going to come to them softened in the form of Michel's "emergency brake". And the reforms they did not want to be forced to make, they will have to carry out in agreement the recovery plan they send to the committee, which, if not sufficient, may be rejected by the latter.  

The frugal have succeeded in getting conditional aid, but more than half of it will be in the form of subsidies. And as a rule, the monetary limits they advocated have been exceeded.

Countries such as Poland or Hungary have succeeded in making the conditionality of the rule of law ineffective in the end, but on the other hand they have received considerable cuts in funds, such as Just Transition, which are important especially in Central Europe for the energy transition.

But, in the final, each Head of State and Government has returned to his country claiming victory and assuring to have accomplished his goal, which is what a politician has to do (or appear to do) in the end.

For both the MFF 2021-2027 and Next Generation EU to go ahead, the European Parliament's ratification is still pending. Although the Parliament has always advocated for a more ambitious package than the one agreed, there is no fear that it will block it.

Conclusion

As I have said, this agreement can be described as historic for several reasons. Apart from the obvious extension of the European committee or the Covid-19 pandemic itself, it is historic because of the Hamilton moment that seems to be about to take place.

It seems that the Member States have learned that the formula used after the crisis in 2008 did not work, that crises affect the entire Union as a whole and that no one can be left behind. Cases such as Brexit and the rise of Eurosceptic movements throughout the continent set a dangerous precedent and could even jeopardize the continuity of the project.

The "mutualization" of debt will allow already heavily indebted countries, which would have problems to finance themselves due to their high risk premium, to get out of the crisis sooner and better. This decision will obviously cause problems that remain to be seen, but it shows that the 27 have realized that a joint financial aid was necessary and that they cannot go to war on their own. As Merkel said when presenting her plan after the pandemic together with Macron: "It is the worst crisis in European history", and she added that, in order to emerge "stronger", it is necessary to cooperate.

This step of some fiscal unity can be seen as a rapprochement to the Federal Europe, at least in the Eurozone, that has been discussed for decades now. Whether this is a path with or without return remains to be seen.

▲ Members of the Armed Forces setting up a pavilion at Ifema for the treatment of Covid-19 [Defense].

COMMENTARY / Salvador Sánchez Tapia

The Spanish Government's declaration of a state of alarm on March 15 as an instrument to fight the spread of COVID 19 has brought with it the not very usual image of soldiers of the Armed Forces (FAS) operating in the main cities and roads throughout Spain to cooperate in the fight against the virus.

For most Spaniards, the presence of military units carrying out their missions on public roads is a rarity to which they are not accustomed, with the exception of the relatively frequent activity of the Military Emergency Unit (UME) in support of civil society, which is well known to a public that, in general, values it very positively.

Apart from these actions, it can be said that the image of uniformed soldiers working directly in front of the public is not common. This subject support is not, however, a novelty, and responds to a long tradition of social attendance provided by the military institution to its fellow citizens when it has been called upon.

Several elements in our recent history have contributed to produce what seems to be a certain estrangement between Spaniards and their Armed Forces. Among them are the shift in the missions of the Armed Forces abroad with the birth of the democratic regime in 1975; the long years of the fight against ETA terrorism, which led Spanish soldiers to hide their military status from the public to safeguard their security; the progressive reduction in the size of the Armed Forces, which eliminated many of the provincial garrisons maintained by the Armies; or the end of military service, which ended up making the Armed Forces unknown to its citizens.

This detachment, if it has existed or exists, has been one-way, for even at times when the military institution may have been most ignored, soldiers have remained close to their fellow citizens, from whom they come, and whom they serve, supporting them in the most difficult situations. Numerous examples testify to the army's long history of service to the citizenry. To corroborate this statement, it is enough to cite cases such as the military support in the floods suffered by Valencia in 1957; that of Operation "Alazán", carried out in 1981 in support of the State Security Forces and Corps in their fight against ETA terrorism, sealing the French-Spanish border; that of Operation "Sentinel", carried out in 1981 in support of the Spanish Army in its fight against ETA terrorism, sealing the French-Spanish border; Operation "Centinela Gallego", in which, for years, Army units have been monitoring the Galician mountains to prevent forest fires; the fight against the spread of camalote in the Guadiana River; or the construction of mobile bridges in many towns in Spain, such as Montblanc, to restore communications after violent meteorological phenomena had interrupted them.

On this occasion, it has been the declaration of the state of alarm that has brought the Armed Forces to the forefront of public attention. Due to the novelty of this intervention, it seems appropriate, at this point, to make a reference letter to the rationale behind the decision to employment the military instrument, and to make known what can and cannot be expected from the actions of the Armed Forces in this subject situations.

The coronavirus pandemic clearly sample the reality that the security challenges faced by modern societies require a multidisciplinary, cooperative response, in which all the forces of society participate, contributing their particular capabilities to produce the synergy required to solve a crisis. The Armed Forces cannot remain outside this effort, and must act on an equal footing with other public and private actors. Sometimes, when the crisis is of a military nature, they will do so by leading the effort; at other times, they will assume a support role to other agents, which they will carry out without seeking any subject prominence.

In the specific case of this crisis, the contribution of the Armed Forces to the effort by deploying resources responds, not merely to an intention to graphically capture this reality, but also to the recognition that the crisis will be long, that it will require the cooperation of all, and that the solution requires the contribution of resources beyond the ordinary ones.

The main mission of the Armed Forces is the military defense of Spain against external threats. From this mission derive their organization, their preparation, their dimensions, and the equipment and armament that equips them, optimized, within the possibilities of the human and material resources of the Nation, and in agreement with the will of the Spanish people, to respond to the demands of this mission, which constitutes their true raison d'être [1].

This does not preclude that the Armies can and should fulfill other missions, which they will execute within their capabilities. In fact, from a legal point of view, military participation in the coronavirus crisis is reasonable if one takes into account that, agreement to the Organic Law of National Defense, one of the missions of the Armed Forces is to "preserve, together with the institutions of the State and the Public Administrations, the security and welfare of citizens in cases of serious risk, catastrophe, calamity or other public needs, as established in the legislation in force" [2].

The Royal Decree declaring the state of alarm leaves no doubt as to the legislator's intention to involve the Armed Forces in the resolution of the crisis, since Article 4 establishes the Minister of Defense as one of the competent authorities delegated by the President of the Government for the coordinated management of the crisis, and because it specifically and explicitly empowers these authorities to require the Armed Forces to act in tasks that guarantee the effective fulfillment of the measures included in the decree [3].

By virtue of the provisions of the Military degree program Law, when a state of alarm is declared, the members of the Armed Forces are invested as "agents of the authority" with regard to the duties set forth in the decree of declaration, which brings them closer to police subject functions. Specifically, and in agreement with Article 5.2. of the decree, this condition empowers them to "carry out checks on persons, goods, vehicles, premises and establishments that are necessary to verify and, where appropriate, prevent the services and activities suspended in this royal decree from being carried out, except for those expressly exempted". To this end, "they may issue the necessary orders and prohibitions and fail the activities or services that are being carried out".

Having defined the legal framework for action, it should also be considered that the employment the Armed Forces requires a minimum familiarity with the military organization, as well as with its capabilities and limitations. While it is true that the Armed Forces offer a wide range of possibilities for action, it is necessary to be aware that there are tasks for which they are not qualified, and that the use of these capabilities must be in accordance with their specific employment possibilities and procedures.

This reality, together with the imperative need for the employment of military means to be done in a coordinated manner with all the actors involved in the resolution of the crisis, justifies the presence of the Chief of Defense Staff (JEMAD) -who is also the advisor the President of the Government and the Minister of Defense in operational subject in the Situation Committee that the Royal Decree of declaration of the state of alarm has constituted in support of the Government.

The first and most important capacity with which the military institution contributes to the resolution of the crisis is that which resides in the people who serve in uniform. The Armed Forces put at the disposal of the Nation, not only the power given by the number of its members but, above all, the imponderable strength of its values, placed at the service of the common good: the generous submission , the spirit of sacrifice, the work , the sense of duty, and so many others that are so necessary in times like these, and that make it possible to entrust to the Armed Forces those missions that entail more risk and fatigue, in the certainty that they will do their best to fulfill them.

In the realm of the unquantifiable, there is also the not inconsiderable capacity for planning operations that the Armed Forces have at all levels, from the strategic to the tactical, including the operational. The General Staffs of the three Armies, and those of their subordinate units, have an enormous potential for the organization, coordination and planning of complex operations which, if used, is extremely useful.

The diversity and versatility of a large part of the material means of the Armed Forces makes them particularly useful in circumstances such as the current one. Among the catalog of possibilities are some as varied as the transport, both of staff and equipment, supplies, merchandise, material, or any urgent or essential item, at any distance and by air, sea, or land, especially if it has to be done to remote or difficult to reach places; the support to the construction of shelters, hospitals, or any other installation with the means of castramation of the Army Engineers, who can also carry out specialized works to improve communications, or to ensure the supply of water, electricity, or other services; the sanitary and epidemiological support to the civilian population with specialized staff -both doctors and nurses-; attendance in the distribution and even the packaging of food for large groups; the execution of security and protection tasks for essential or particularly sensitive installations, such as power production and distribution plants; the surveillance and control of compliance with the terms of the state of alarm by land, sea and air, either with staff or with conventional or remotely manned means; support for disinfection operations in large areas; the production of medicines or means of health protection; communications support; the provision of essential services such as control of airspace, or interurban public transport or within major cities; etc. The list could be extended almost ad infinitum.

The realization of the enormous amount of possible support, together with the magnitude of the pandemic itself, and the consideration of the fact that military capabilities are sized to meet the needs arising from the most likely operational scenarios, and not for a massive support scenario such as the one we are now facing, suggest that, in this case, the needs far exceed the possibilities of the Armed Forces and that, without proper planning, the institution could be totally consumed in the development these noble tasks.

The above would be very laudable, but it would anchor the entire National Defense capability in a task other than the military defense of Spain, rendering the Armed Forces incapable of dealing with the tasks which, it is reasonable to argue, constitute the raison d'être of the Armed Forces, and which must continue to be attended to, even in the midst of a pandemic. Beyond that, they would also be unable to sustain the operational efforts that the Government has decided that the Armed Forces should carry out abroad, some of which could be reconsidered.

The aforementioned limitations make it advisable to measure the effort required from the Armed Forces -also because they must sustain it over a long period of time-, which must be provided with a selective criterion, the Armed Forces acting in application of the principle of subsidiarity, when there are no civilian agencies, public or private, capable of providing support, or when the support is of a risky, dangerous or arduous nature that makes the employment military resources advisable.

With the exception of the EMU, the Armed Forces are not specifically equipped, organized, or trained for the subject of tasks inherent to an emergency such as the current one. In some cases, military capabilities are directly applicable in a situation such as the coronavirus. In others, however, the provision of support cannot be immediate and requires a minimum period of adaptation, reprogramming, and training to ensure that military capabilities are applied in a manner appropriate to the nature of an operational environment with which the soldier may be unfamiliar. For example, it is not desirable to simply employ a unit trained for high-intensity combat in emergency or humanitarian support roles without first making the transition [4].

In this adaptation time, it is always necessary to include the response time that the units must have between missions to recover, reorganize, maintain the material in operational conditions, fill in the consumed resources, plan the new mission, move between employment scenarios, etc. Even if they are in a high availability situation and their response time is reduced to a minimum, it will never be equal to zero if they have already been employed.

The employment the Armed Forces in this subject of tasks must always be done with a criterion of strict temporality. If this does not happen and the Armed Forces perpetuate in their missions of support to the civilian population, there is a possibility that they will progressively expand their tasks, atrophying the development of civilian agencies that could and should preferably perform them, and becoming their competitors; that they may, in the process, neglect their fundamental tasks -to the point of reorganizing, equipping and training themselves only for their civilian support dimension-; and that they may compromise the neutrality and the character of disinterested servants that the citizens demand from their Armed Forces and that they appreciate so much from them. As soon as the situation allows it, the Armed Forces, with the exception of the UME, it is understood, must return to their usual framework of action.

That moment has not yet arrived. The end of the crisis is not yet in sight, and Spaniards must be prepared for a long battle against COVID 19. In this struggle, citizens can be convinced that their Armed Forces, and all those who compose them, will be at their side, attending to their needs, sharing the same hardships, participating in their mourning. When the virus has been defeated, they will rejoice with them and, in silence, they will return naturally to their duties, without waiting for applause, with the intimate satisfaction of having fulfilled their duty in the service of their compatriots.

* Brigadier General (R)

[1] An exception to this is the EMU, a unit specially organized to carry out tasks in support of the civilian population.

[2] An issue outside of this work, and which would be the subject of a more in-depth analysis, is that the aforementioned Organic Law 5/2005 introduces a change, extending them, of the constitutional missions that Article 8 of the Magna Carta imposes on the Armed Forces.

[3] Royal Decree 463/2020, of March 14.

[4] Consider, for example, the differences between providing a facility protection service in an area of operations, in an environment that may be hostile, and which is subject to certain Rules of Engagement (ROE), and providing it in a nuclear power plant on national territory in a circumstance such as the present one. As can be easily understood, the response cannot be the same, and employing in the latter an individual trained for the former requires a certain adaptation.